Appointing Arbitrator Unilaterally Does Not Amount To Waiving Ineligibility: Delhi High Court
The Delhi High Court has held that a party's unilateral appointment of an arbitrator cannot by itself amount to an express waiver of the arbitrator's statutory ineligibility under Section 12(5) of the Arbitration and Conciliation Act, 1996.
A Division Bench of Justice Anil Kshetarpal and Justice Vimal Kumar Yadav upheld the setting aside of an arbitral award partly in favour of Ahluwalia Contracts (India) Limited (ACIL), despite the Airports Authority of India (AAI) having appointed the arbitrator and participated in the arbitration for nearly four years.
The court observed, “The mere fact that the appointment was made by AAI does not amount to an express agreement in writing by both parties to waive the applicability of Section 12(5) of the A&C Act. The act of appointment and the statutory waiver contemplated by the proviso operate in distinct fields and cannot be equated with each other.”
Section 12(5) makes a person falling within specified categories under the Seventh Schedule ineligible to be appointed as an arbitrator. Its proviso allows the parties to waive the disqualification, but only through an express written agreement after the dispute has arisen. The court held that this requirement cannot be met through conduct or participation in the arbitration.
The dispute arose from a works contract awarded by AAI to ACIL in 2009. AAI later levied compensation of ₹1,45,50,192 on ACIL in December 2015.
ACIL subsequently invoked arbitration. AAI appointed S.C. Gupta, Chief Engineer (Retd.), Central Public Works Department (CPWD), as the sole arbitrator in May 2019.
Both sides participated in the arbitration until August 2023 without objecting to Gupta's appointment. The arbitrator allowed ACIL's first claim and partly allowed its fourth while awarding interest and rejecting AAI's counterclaims. AAI challenged the award under Section 34 but not Gupta's appointment.
During the hearing, the Single Judge suo motu raised the issue and set aside the award. ACIL appealed under Section 37.
The division bench, relying on Bhadra International and Bharat Broadband Network, held that neither appointment nor participation amounted to the required written waiver. It also held that the issue could be examined as it concerned the tribunal's inherent jurisdiction.
The award was set aside only on the validity of the unilateral appointment. The division bench dismissed ACIL's appeal.
For Appellant (Ahluwalia Contracts (India) Limited): Senior Advocate Anil Airi, with Advocates Dhruv Rohatgi, Chandrika Sachdev, Dhruv Kumar and Harsh Gautam.
For Respondent (Airports Authority of India): Advocates Vaibhav Kalra, Neha Bhatnagar and Deepankar Singh.